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BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRStrading partners to build resilience, alongside the usual formal mechanisms of rule-settinginstitutions and free trade agreements.Digitalisation19.Digitalisation refers broadly to the significant and ongoing development of digital technologies(e.g. digital platforms, blockchain, artificial intelligence, 3-D printing) and the products andservices that this gives rise to. Digital products and services also flow easily across borders.This provides opportunities for New Zealand businesses to change the way they operate;interact with consumers; reach new markets; and provide new products and services toconsumers.20.We are seeing business models changing, with a strong growth in businesses that provideplatforms for businesses to connect with customers (such as Trade Me and Amazon) and agreater focus on data (such as Google and Facebook). Combined with the general reduction oftrade barriers over recent years (though, as we note below, we are seeing something of anuptick in protectionist policies again), we are also seeing New Zealand businesses more able toconnect and participate in overseas markets.21.Businesses that can adapt to, and take advantage of, these new technologies will have higherproductivity and be better placed for the future. The CCA portfolio can play a role supportingthese businesses to thrive by providing a regulatory environment that supports innovationand competition, and easier access to overseas markets. This will drive better outcomes forconsumers while also supporting the wider goals of a more productive, resilient economy.22.These same trends also present opportunities and challenges for consumers. Thesedevelopments provide consumers with an increasing choice of new products and services thatcan be sourced from almost anywhere in the world. However, this can make it harder forconsumers to protect their interests, for example when seeking redress in relation to crossborder transactions. And while the increasingly sophisticated use of consumer data canbenefit consumers (for example, in terms of the products and services that are offered), it canalso present challenges with respect to consumers’ control over that data.What do these mean for the CCA portfolio?Financial wellbeing23.A crucial consideration for the portfolio in the coming years is going to be the impact offinancial pressures and digitalisation on consumers and their financial wellbeing. These issuesare not new, but are being exacerbated by COVID-19. Recent work in the portfolio includesregulating credit contracts, regulating financial service providers, reviewing insurance contractlaw, reviewing the conduct of financial institutions and reviewing the settings for KiwiSaverdefault providers.24.These interventions, however, have focussed more on influencing the conduct of third partiesrather than New Zealanders themselves. With an increase in debt problems, financial worriesand personal insolvency as a result of COVID-19, there is a need to take advantage of the fullsuite of levers available in the portfolio (and across portfolios where necessary) to moredirectly influence individuals’ financial capability and wellbeing. KiwiSaver, consumerMINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT7

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRSprotections, influencing financial service providers, improving digital connectivity andaffordability 1 and the insolvency regime all play an integral role in: improving financial wellbeing and resilience (e.g. through changes to KiwiSaver, betterprovision of information, introducing a Consumer Data Right to facilitate access toconsumer data leading to better targeted products and services) avoiding debt becoming problem debt (e.g. implementing the newly strengthenedcredit contract protections, and provision of new tools and services via the Commissionfor Financial Capability to support at-risk consumers) dealing with problem debt once it arises (e.g. reforming the personal insolvency regime– this is comparatively punitive in New Zealand and has not been reviewed since 2006).Regulatory Stewardship25.While not a trend or issue in the same way as the others, considering the portfolio from aregulatory stewardship point of view provides important context. There has been significantregulatory reform in recent years, particularly in the financial markets and consumer policyareas. Future work will need to take this into account and strike an appropriate balancebetween letting these changes bed in (supported by effective monitoring and evaluation) andfurther changes, and also between regulatory and non-regulatory approaches to achievingdesired outcomes.Summary of each system within the portfolio26.The remainder of this chapter provides further detail about each of the six regulatory systemsthat make up the Commerce and Consumer Affairs Portfolio: What the system is about Key policy work underway How the system is being impacted by emerging themes (where relevant).Corporate law and governance27.The corporate law and governance system sets the rules relating to the establishment,management and closure of companies and other types of entities. This system contains thekey legal “infrastructure” for the creation, operation and dissolution of entities that manyother regimes rely on or build from. While the specific activities carried out by entities are inmany cases regulated by other regulatory systems those regulatory systems rely on therobustness of the corporate governance system, which establishes the overarching obligationsof entities and their members. For this reason corporate law and governance system can oftenoverlap with other policy areas.28.MBIE is responsible for the policy and operational areas of the corporate governance system.Operational areas include:1This particular issue falls within the Digital Economy and Communications portfolio.MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT8

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRS29. The Companies Office, which is responsible for the registration of many types ofentities, including companies, incorporated societies and limited partnerships, and forthe public enforcement of the legislation that those entities operate under. It operatesregisters for some regulated occupations, such as auditors and financial serviceproviders, and some registers outside of your portfolio including charitable trusts,retirement villages and the New Zealand Business Number. The Insolvency and Trustee Service (the Official Assignee’s Office), which administers allpersonal insolvencies (i.e. bankruptcies, no asset procedures and summary instalmentorders) and some liquidations under the Companies Act 1993. The Official Assignee isalso responsible, through the Criminal Proceeds Management Unit, for the custody andcontrol of forfeited or retained criminal proceeds.MBIE is focusing on: Reviewing access to “beneficial ownership” information. This review focusses onwhether there is a need for improved access to information about persons who directlyor indirectly exercise control over companies and limited partnerships. Identifyingbeneficial owners can be crucial information for law enforcement to “follow themoney” under anti-money laundering, terrorism financing and other regimes that relateto suspect assets held by corporate vehicles. Beneficial ownership information can alsobe useful to regulators like the Overseas Investment Office and the wider intelligencecommunity. Climate-related financial disclosures. MBIE is working with the Ministry for theEnvironment on legislation requiring listed issuers and large banks, insurers andmanaged investment schemes to report on the impacts of climate change on theirbusinesses. The objective of this legislation is to move to a position where the effects ofclimate change become routinely considered in business and investment decisions. Itrequires businesses to measure and report clear, comparable, consistent, timely anddecision-useful information about their risks and opportunities arising from climatechange.Financial markets30.The financial markets system focusses on promoting confident and informed participation ofbusinesses, investors and consumers in financial markets, and the settings for well-functioningfinancial markets generally.31.New Zealand’s financial markets regulatory settings have been overhauled since the GlobalFinancial Crisis, with the introduction of the Financial Markets Conduct Act 2013, theestablishment of the Financial Markets Authority as regulator, and ongoing reforms.32.MBIE’s role in the system is to provide policy advice on a range of issues relating to thefinancial markets conduct regulatory system, including:a. the Financial Markets Conduct Actb. regulation of financial adviceMINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT9

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRSc. regulation of the conduct of banks and insurersd. insurance contract lawe. the KiwiSaver Act 2006 – specifically the governance of KiwiSaver schemes and thescheme rules that apply to all KiwiSaver schemes.33.MBIE is also the monitoring agency for the Financial Markets Authority and the Commissionfor Financial Capability, which both play key roles in the financial markets regulatory system,outlined below.34.MBIE is focussing on:35. Improving the conduct of financial institutions. Recent reviews have found that largefinancial institutions like banks and insurers have not paid due regard to, or had systemsto support, good outcomes for consumers. This work involves introduction of a newlicensing regime for these institutions through the passage of the Financial Markets(Conduct of Institutions) Amendment Bill and supporting regulations to ensureconsumers are treated fairly. Improving financial wellbeing of New Zealanders, to reduce hardship and problem debt,increase savings, and increased investment and participation in financial markets. Thiswork includes reviewing the arrangements for KiwiSaver default providers. Reviewing KiwiSaver default providers. Providers of default KiwiSaver funds arereviewed every seven years, and the terms for current providers are set to expire on 1December 2021. Ahead of this, MBIE and the Treasury reviewed the settings for defaultfunds and have set new requirements for funds aimed at providing better outcomes fordefault members. A Request for Proposals has been released to the market and we areexpecting responses before the end of the year. We will then enter an evaluationprocess in 2021, with the aim to select and appoint new default providers by May 2021. A new regulatory regime for financial advice. Financial advice includes therecommendations given by people who work in banks, and by mortgage, insurance andinvestment brokers, and those who create investment plans. This work will involvesupporting the implementation of the Financial Services Legislation Amendment Act2019, which will come into force in March 2021. Modernising insurance contract law. Insurance helps consumers and businesses copewith unforeseen events. However, New Zealand’s insurance contract law is fragmentedand outdated, and a number of problem areas need to be addressed to facilitate moreefficient insurance markets that better meet parties’ expectations. Cabinet agreed inlate 2019 to reform New Zealand’s insurance contract law. We have begun work on anexposure draft Bill to give effect to Cabinet’s decisions.COVID-19 has raised questions about the financial resilience and capability of New Zealanders.Are consumers financially prepared for further economic shocks or a prolonged downturn?How well-informed are consumers about the range of products and services that are availableto them?MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT10

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRS36.A further question arises as fewer New Zealanders are expected to own their own home inretirement and so will be more reliant on saving for their retirement. Are KiwiSaver settingsdelivering the best outcomes for New Zealanders to enable them to make good choices abouttheir plans for retirement?Competition37.This system is focussed on the protection and promotion of competition. Effectivecompetition from domestic and international firms gives New Zealand businesses an incentiveto increase their efficiency and innovate, and can lead to improvements in productivity andconsumer wellbeing (such as better quality products and services, and/or lower prices).38.While competitive markets will often lead to desirable consumer outcomes, direct regulatoryintervention may be required in markets where there is little or no competition. In thiscontext, this system oversees the economic regulation of aeronautical services at the threemain airports (Auckland, Wellington and Christchurch), gas pipelines and electricitytransmission and distribution businesses with respect to their monopoly functions.39.The Commerce Act 1986 underpins the competition system in New Zealand. The Act ismaintained by MBIE and enforced by the Commerce Commission. MBIE also actively promotescompetition by advising on government proposals that may affect competition (such asamendments to the way occupations are regulated) and considering where there are parts ofthe economy where competition may not be working particularly well.40.In 2018, the Commerce Commission gained the ability to undertake market studies todetermine whether there are any factors that may be impeding competition in a market. Thefirst market study into the retail fuel sector was completed in December 2019 with thepublication of the Commerce Commission’s final report. The final report made a number ofrecommendations aimed at improving competition and performance of retail fuel markets forconsumers. The previous Government accepted the report’s findings and addressed some ofthe recommendations by passing, in mid-2020, the Fuel Industry Act to improve competitionin the retail fuel market. We are continuing to support work on regulations under that Act toprovide for its implementation.41.MBIE is focussing on: Merchant service fees. We are ready to advance this Government priority and wouldwelcome a discussion on timing and the relationship with our work on a consumer dataright given that payment systems are complex two sided markets that are rapidlyevolving in the face of substantial technological disruption. Advancing work in this areawill require contributions from a range of agencies including MBIE, Treasury, theReserve Bank, and the Commerce Commission. The Ministers of Finance and SmallBusiness are also likely to have a strong interest in this work. Advancing market studies into the supermarkets and building supplies sectors. We arepreparing to advance your priority to refer market studies into the supermarkets andbuilding supplies sectors to the Commerce Commission. The Commerce Commissionhas resourcing to undertake one study at a time. Our preliminary view is that asupermarkets study will take approximately 16 months, concluding in May 2022, withMINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT11

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRSthe building supplies study to commence in June 2022. More generally, we believethere is also an opportunity to look at further integrating market studies into thecompetition regulatory system. This could be done by assessing alternative mechanismsto implement any pro-competitive measures recommended by the CommerceCommission in market studies. One such mechanism would be industry codes that couldbe made in regulations.42. Identifying barriers to competition and opportunities to promote competition in specificsectors across the economy. Generic competition law is unlikely to be sufficient tomaximise competition but it is an important foundation. It is therefore important tolook beyond generic competition law and consider how competition can be lifted indifferent industries to get better outcomes for New Zealanders. This will requiresignificant collaboration across portfolios and with specific industries. Focus areas so farhave been petrol markets and retail payments (EFTPOS, debit and credit cards). Maintaining the effectiveness of New Zealand’s competition laws. A bill is being draftedto address issues relating to the misuse of market power. The bill will also removeexemptions in the Commerce Act relating to intellectual property, and give theCommerce Commission information sharing powers, among other matters. Three waters reform. Economic regulation is likely to have an important part to play insecuring better consumer outcomes as part of the reforms being made to the deliveryand regulation of drinking water, wastewater, and stormwater.Digital technology is enabling new modes of doing business. In general, digital technologypromotes competition through such things as enabling businesses to better connect withconsumers, but it also raises new challenges for competition law and enforcement. Thegrowth of strategically important digital platforms, such as Google and Facebook, has focussedattention on the intersection between competition law and other laws such as fair trading,privacy, and consumer protection. Global responses led by major overseas economies arelikely to be forthcoming. The challenge for New Zealand authorities is to keep capability inassessing competition impacts in fast movin

BRIEFING FOR INCOMING MINISTER OF COMMERCE AND CONSUMER AFFAIRS MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT 5 Consumer Protection: consumer information and programmes, including product safety. Insolvency and Trustee Service: administers all bankruptcies and other personal insolvency processes, and some company liquidations.